Greece calls for tax cuts, other help

Greece wants tax cuts, extra help for the poor and unemployed, a freeze on public sector lay-offs and more time to cut its deficit under a plan likely to run into strong opposition at a EU summit this week.

The new coalition government's programme, seen by Reuters on Saturday, reflected public pressure to ease the terms of a E130 billion (R1.3 trillion) bailout saving Greece from bankruptcy but only at the cost of harsh economic suffering.

If implemented in full, the new programme would undo many austerity measures the country agreed to in February to clinch the bailout package, its second since 2010.

Euro zone partners have offered adjustments but no radical rewrite of the bailout conditions, with paymaster Germany particularly resistant to Greek calls for leniency.

Greece's programme includes a call for the recapitalisation of the country's fifth-largest lender, ATEbank – a state-owned agricultural bank that EU sources said this month was among several lenders the European Commission wanted to be wound down. The finance ministry has denied that report.

The programme, agreed by leaders of the three-party coalition, faces its first test at a two-day EU summit starting on Thursday and sure to be dominated by the debt crisis that started in Greece and is now threatening to engulf Italy and Spain, the euro zone's third and fourth-largest economies, respectively.

Inspectors from Greece's "troika” of lenders – the EU, European Central Bank and International Monetary Fund – were due in Athens today to review the country's progress.

Officials said the bailout package should be revised only to reflect time lost on two elections since early May and a deeper-than-expected recession.

"The general target is for there to be no further reductions in wages or pensions and no more taxes,” the Greek government programme said.

It called for a cut in the 23 percent value added tax rate for restaurants and farmers, a freeze on lay-offs in the bloated public sector and for unemployment benefits to be paid for two years rather than one.

The government would also ask for two more years, until 2016, to cut its budget deficit to 2.1 percent of the national economic output from 9.3 percent in 2011, an extension that would require extra foreign funding.

The lowest income tax threshold should be raised, the document said, and the minimum wage – cut by 22 percent in February – revised in line with agreements between employers and workers. The programme calls for the accelerated payment of E6bn of government debt to suppliers.

The coalition brings together the conservative New Democracy, Socialist Pasok and Democratic Left in an alliance that will face constant pressure from an opposition led by the radical leftist Syriza bloc.

Conservative Prime Minister Antonis Samaras, who switched from opposing the first bailout to reluctantly supporting the second, has promised to soften the terms without jeopardising Greece's place in the euro zone.

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